Google is popular because they’re good at getting it right. When you go to search for something on Google, you typically find what you’re looking for right away.
In a typical auction, if we had four people bidding, and the bids were $5, $4, $3, and $2, respectively, you would expect bidder number one, at $5, to get the best position.
But that’s not the case with Google AdWords
Read below to understand how Google determine where you rank and what you pay.
Google is obsessed with making sure everything they display is relevant, and that extends beyond organic results, to paid listings as well. Fortunately, this makes for a great opportunity. Users want relevant information, and advertisers want to show relevant answers, so those listings get clicked on. If Google shows the best ads, users come back to Google, and Google profits.
Fundamentally, Google AdWords is an auction-based platform. And, by that logic, the person with the highest bid would appear at the top of the page, or, in what we call, position number one. Google Adwords does not work like a typical auction. It’s an auction system with a twist.
Google factors in a lot of other signals to determine which ads are most useful. And the most useful ads go into a higher position. So, at this point, you’re likely thinking,“Well, what are those other factors?” Well, first is your expected click-through rate. Google’s going to make an educated guess on how often people are going to click on this advertisement. Next, you have your landing page experience. Your advertisement is only useful if your visitor can find what they expect, once they click over to your site.
Google also has extensions that you can add to your ad units.
For example, you might add a phone number, your domain as a headline, or include recent reviews from customers. And I’ll write more on these later, but the ability to leverage these extensions, may increase your quality. So, Google takes all of these factors, along with your bid, and turns it into your ad rank. To help make this a bit more apparent, let’s go back to our first example. We had four ads with the bids at $5 ,$4, t$3, and $2.
Let’s assign some quality scores to these advertisers.
This is their overall quality score, and I’m going to put it as low, high, high, and medium. They also have different formats with varying impacts. The first ad doesn’t have any formats, so there’s no impact. The second ad has access to one format, so there’s a low impact. The third ad is using some formats as well, and so is the last one, and we’ll score those as medium. Now, Google is going to spit out a score. So, let’s say it looks something like this. The first advertiser gets a rank of eight, the next, 18, then 25, and 20. Now, if your rank is too low, you actually won’t appear at all.
So, in my example, even the highest bidder, at $5 with a rank of eight, that’s probably too low to even have their advertisement display.
So now I’m going to reorder this by the score,and what you can see is that the two lowest bids, at $3 and $2s, are now going to take up the highest positions, where the higher bids are actually going to show up lower on the page, because of the overall score that they’ve achieved. Now, I should point out that these scores are completely arbitrary numbers that I’m using only as an example. There’s no actual way to identify the true mathematical formula that’s being used, but I just want to get you familiar with why your bids, and your placements, are going to show up differently.
Now, with that said, it still gets a little bit more complicated. Google uses a variation of what’s called a second price auction. So you only have to pay the minimum amount to beat your competitor, and maintain your position. This means, the advertising bids will be automatically adjusted for you. Google does this to encourage you to bid your true highest amount, knowing they’ll always correct the bids to be in your favor. So, in this case, the top bid of three dollars might be adjusted to two dollars and 15 cents, to simply beat the bidder just below them.
And that’s how Google manages its auctions. I’ll be writing another post on how to achieve high-quality scores. Essentially, it boils down to improving your ad quality through the right keywords, and ad copy, refining your landing page experience, and leveraging all of the available ad formats.
Don’t want to deal with all this? We understand a 100%.
Let us do it